The Investment Management Association (IMA) has called for a separate bank deposit insurance system allowing depositors instant access to their money in the event of insolvency.
The IMA has spoken out after HM Treasury, the FSA and the Bank of England announced their intention to maintain a well-functioning banking system in the wake of the Northern Rock debacle.
It says customers must be confident they can have access to their funds without delay regardless to what is happening to the bank involved, using a system similar to the Federal Insurance Deposit scheme in the United States.
The IMA praised the Financial Services Compensation Scheme (FSCS) but says the process involved can be drawn-out and is “manifestly unsuitable” for providing depositors with their money in the short-term.
It says it would not replace the deposit protection scheme under the FSCS, but would complement it.
Applicable insolvency law also needs to be amended and the deposit protection system or Bank of England must be empowered to provide liquidity ahead of a payout from the FSCS.
Guy Sears, director of wholesale at the IMA, says: “The focus has to be on ensuring depositors have full confidence while critical banking services are maintained.
“While there may be room for debate about appropriate levels of depositor protection that is largely irrelevant in the current climate.
“Depositors' interests must be put at the forefront.”
020 7034 2636
Lack of innovation for solutions
Some 2,000 consumers affected
Achievements, charity work and other happy snippets
Appetite has suffered since Brexit vote
'Failure to pay attention can result in enforcement'